After 35 years of stockbroking for some of the biggest houses and investors in Australia and the UK, the Secret Broker is regaling Stockhead readers with his colourful war stories — from the trading floor to the dealer’s desk.

Yes, he’s back.

The Nick Kyrgios, the Charlie Sheen, the Shane Warne, the John Daly of the financial markets is back and all is (almost) forgiven.

Today, we’re talking about the bad boy of the financial markets, Bitcoin, whom the bankers hated and the Millennials loved.

When we last saw Bitcoin he was in his shorts and you would frown and tut tut as he overtook you at twice the limit, P plates on, cap backwards and three of his spotty-faced crypto mates hanging out of the windows.

Now he is back, looking more grown up, with the cool shades on and his black leather jacket draped over his shoulders.

The type who, if the daughter came home with him as her new boyfriend, her mother would get jealous.

But like Fat Elvis, his volatility has slowed down a bit and he has started to find a level where he is starting to feel more comfortable about himself and what he is capable of doing.

To give you an example of his maturing, recently, when the rioters in Nigeria asked for some financial help, a crowdfunding campaign was started to help with their cause and famous people from all around the world gave to it.

When the authorities found out about this, they froze their bank accounts. So a Bitcoin account was set up because BTC accounts can’t be frozen and the same famous people could keep on giving in exactly the same way.
 

The big Square-off

The billionaire founder of Twitter, Jack Dorsey, was one of those who gave.

Our Jack is also the founder of the payment system Square and his latest move has sent a few shivers down the spine of Wall Street, as Square have taken U$50m of their cash reserves and put it into Bitcoin. In fact, Jack’s bio on Twitter contains just the word ‘bitcoin’ and nothing about Twitter or Square.

This was such a big move, Square released a three-page document on how they did it, how they are going to securely hold them and more importantly, how they are going to be accounted for in Square’s balance sheet.

Cash is cash, so that’s okay for the accounts. But Bitcoin is classed as an intangible asset, so it will be moved to another column in the accounts.

Cash goes down and intangibles go up and because of the accounting rules on intangible assets, its value can be written down but never written up (until it is sold).

(Here’s the page for those of you who are interested in how they are handling this ‘asset’.)

Around the same time as Square was switching some of its hard-earned cash into Bitcoin, PayPal announced that from January 2021, their US-based customers will be able to transfer Bitcoin into their PayPal accounts to buy anything they want from their 23 million registered merchants.

Yes, they will roll it out to ALL their global customers.

PayPal will handle everything so the selling merchant will receive cash into their account and not Bitcoin. Paxos is the company making a motzah from it it happen for PayPal.
 

Keep the transaction change

And then lastly, something which did not get much press, was the fact that the largest transaction to ever occur in Bitcoin Land happened this week. Somebody transferred 88,857 Bitcoins worth US$1.6bn into another single account.

If you had to traditionally wire that much, a bank in the USA would charge you about US$160,000. The cost of the BTC transaction? You’ve paid more for a large takeaway coffee in Melbourne.

China, Bermuda and now Cambodia have introduced their own digital versions of their currencies. Cambodia sees it as a way for families to receive bank-fee-free money which is sent to them by their overseas supporting family member.

So, the poor old bankers are starting to see more slippage, but this time it’s coming via the corporates and the barriers to entry are slowly being chipped away at.

The best analogy that I can think of is Blockbuster and Netflix.

If you think of Blockbuster as a bank and Bitcoin as Netflix 10 years ago, then you can use the past to see the future.

In 2017, JPMorgan Chase chief executive Jamie Dimon said he would fire any employee trading bitcoin, on the spot, for being “stupid”. In 1998 when Netflix offered themselves to Blockbuster for US$50m the Blockbuster CEO John Antioco burst into laughter.

At the time, Blockbuster had 9,000 branches stores. Now they have one.

Can’t wait for the movie.

I have my agent on standby waiting for the Netflix call. I’ve told him he gets his 10% in Bitcoin and I’ll take the balance in Netflix stock and therefore no banker is required.

Unless of course, they want a specific role in the movie. Toe tag seems to fit the bill!

The Secret Broker can be found on Twitter here @SecretBrokerAU or on email at [email protected].

Feel free to contact him with your best stock tips and ideas.

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